As credit cards, debit cards, and other alternatives to currency have grown in popularity, the competition among the institutions that provide these financial instruments has also increased. Today, many consumers choose a credit card, debit card, or the like, based on the financial incentive to the consumer for using such a card. For example, some credit cards offer low interest rates on balances carried from month to month, other credit cards offer miles or points in frequent flyer programs, while still others offer low fees for common financial transactions.
One popular incentive offered to consumers of credit cards is a cash or cash-equivalent award or rebate as a percentage of the consumer's purchases. Generally, such money back award systems provide as an award a percentage of the dollar amount of the total purchases made by a consumer within a given time frame, usually one year. In an effort to balance the costs of administering the system with the benefits and incentives provided to consumers, the percentage used to calculate the cash or cash-equivalents that will be provided to the consumer can vary depending on the dollar amount of the consumer's purchases. Specifically, the percentage will increase as the total dollar value of the consumer's purchases increases.
Unfortunately, many cash-equivalent award systems are inflexible. Some restrict the uses of the accumulated award in such a manner as to limit the flexibility of the entire award system to the consumer. Currently, common award usage is limited to: crediting the award back to the credit card account, mailing a check or a certificate from a partner merchant to the consumer, or donating the award to partner charities. Thus, while the consumer many nominally have been given an award, many consumers may not value the award highly because they cannot conveniently access the award or receive the award in a form that is desirable. For example, partner merchants may not be merchants at which the consumer wishes to shop. Similarly, the partner charities may not support any causes the consumer is concerned about. Furthermore, if the consumer were to attempt to receive a check, the consumer must physically deposit the check at their bank. For many consumers, therefore, the only efficient method for accessing their award is to have the award credited back to their credit card account, which may also not be a desirable option.
Award systems are designed as an enticement to consumers to use the financial institution's credit cards and, the more the consumer values the award, the more loyalty they have to the financial institution that provides the award. Therefore, financial institutions strive to provide rewards and reward disbursement options that consumers perceive as valuable.